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Rhode Island exchange overview

HealthSource RI is the state-run exchange in Rhode Island. It is an active purchaser exchange (as opposed to a clearinghouse model), which means that the exchange negotiates directly with insurers, and determines which plans will be made available each year, rather than simply accepting all qualified health plans that insurers offer.

Rhode Island has a state-based individual mandate as of 2020, with a penalty modeled on the federal penalty that applied until the end of 2018. Rhode Island also received federal approval for a reinsurance program that is helping to keep premiums more affordable, particularly for Rhode Island residents who don’t qualify for premium subsidies and have to pay full price for their coverage. Across the state’s two insurers, average pre-subsidy premiums dropped by 0.5 percent for 2020 (without the reinsurance program, rates would likely have increased by about 6 percent).

Rhode Island is one of two states where people can normally enroll as late as the 23rd of the month and still get coverage the first of the following month. In most states, the deadline is the 15th of the month, but Massachusetts and Rhode Island use the 23rd. (Washington’s state-run exchange also had a 23rd of the month deadline until April 2017, when they switched to a 15th of the month deadline)

HealthSource RI took a unique approach to renewals in the first year (at the end of 2014, for 2015 coverage), requiring enrollees to actively renew their coverage, with no auto-renewal option available. They abandoned that requirement in subsequent years, however, switching to the same sort of auto-renewal default that other states use. Requiring active renewal is a good concept in terms of ensuring that people end up with the plan that best fits their needs each year, as opposed to just keeping their existing plan due to inertia. But the downside is that people end up uninsured if they forget to actively renew their coverage, which is why Rhode Island switched to an auto-renewal default.

Due to COVID-19 pandemic, uninsured residents have until April 15 to sign up for coverage

The special enrollment period continues through April 15, and coverage will take effect the first of the month after the person enrolls. The special enrollment period only applies to uninsured residents; it’s not an opportunity for people with health insurance to make changes to their coverage.

Reinsurance and a state-based individual mandate took effect in 2020

Health Source RI and the Rhode Island Office of the Health Insurance Commissioner partnered in 2018 to create a Market Stability Workgroup, tasked with creating state-level strategies to stabilize Rhode Island’s health insurance market. The workgroup published their recommendations in June 2018. At that point, it was too late to make any major changes for 2019, but there was plenty of time to implement new programs for 2020.

Congress and the Trump administration have made repeated efforts to destabilize the insurance markets, including an expansion of short-term and association health plans, the elimination of federal funding for cost-sharing reductions (CSR), and the elimination of the individual mandate penalty. The Market Stability Workgroup considered actions that Rhode Island could take to counter the Trump administration’s efforts to “dismantle the Affordable Care Act” and “jeopardize the progress Rhode Island has made in recent years under the [ACA].”

Ultimately, Rhode Island’s workgroup recommended that the state take the following actions:

Seek a 1332 waiver to implement a reinsurance program — legislation (S2934 / H8391) to get the ball rolling on this was enacted in 2018, and the state submitted its 1332 waiver proposal to CMS in July 2019, with approval coming the following month. The idea behind reinsurance is that premiums are lower when the reinsurance program is in place, which results in smaller premium subsidies paid by the federal government. By using a 1332 waiver, the state can keep the savings (referred to as pass-through funding).

Implement new rules that give the state additional regulatory control over short-term health insurance plans. These plans are already highly regulated in Rhode Island (including a requirement that they cover pre-existing conditions), and none are currently for sale. But the workgroup recommended additional regulations. Legislation (S2931) to this effect was considered in 2018, but was not enacted.

In September 2018, Governor Raimondo signed an executive order directing the state to do everything in its power to “ensure access to affordable and quality healthcare for all Rhode Islanders.” The executive order encouraged lawmakers to “codify and strengthen consumer protections,” including the ACA’s protections for people with pre-existing conditions, dependent coverage up to age 26, and essential health benefits mandates. The executive order built on the workgroup’s recommendations (and the reinsurance bill that was enacted in 2018), directing the state to submit a 1332 waiver for a reinsurance program and “aggressively guard against” health plans (such as short-term plans) that don’t cover pre-existing conditions and/or essential health benefits.

Rhode Island’s individual mandate took effect in January 2020 (penalties will start to show up on 2020 tax returns that are filed in early 2021), and so did the reinsurance program. The two programs are intertwined, as the individual mandate penalty revenue will be used to partially fund the reinsurance program.

Rhode Island’s individual mandate penalty amounts are modeled after the penalty amounts that applied under the federal individual mandate penalty in 2018: The greater of $695 per uninsured adult (half the amount for a child), up to a maximum of $2,085 per family, or 2.5 percent of income. The maximum penalty amount under the percentage of income calculation will be equal to the cost of the average bronze plan in Rhode Island (at the federal level, it was equal to the nationwide average cost of a bronze plan).

Under the terms of the 2020 budget bill, any money collected by the state via the individual mandate penalty will be deposited into the Health Insurance Market Integrity Fund, which will be used to fund the state’s share of the cost of the reinsurance program.

Rhode Island’s reinsurance program is fairly modest in terms of the benefits it will provide: For 2020, the state plans to use the reinsurance program to reimburse insurers for 50 percent of claims that are between $40,000 and $97,000 (in most states that have or are planning reinsurance programs, the upper cap extends at least twice that high). The state’s small population and modest reinsurance benefits resulted in a total projected cost of just $14.7 million for the reinsurance program in 2020. Of that amount, the state estimated that between $6.4 million and $7.4 million would come from federal pass-through funding, while the rest would come from the RI Health Insurance Market Integrity Fund. And ultimately, CMS pegged the state’s estimated pass-through funding amount for 2020 at just $5.2 million (for perspective, Minnesota’s 2020 federal pass-through funding is estimated to be $86 million, and New Jersey’s is $190 million).

Rhode Island submitted their 1332 waiver to CMS on July 8, 2019. CMS determined the application to be complete the following week, and granted approval in late August. Insurers in the state had already based their proposed premiums for 2020 on the assumption that the reinsurance program would take effect in 2020, and also on the fact that the state would once again have an individual mandate penalty as of 2020.

Average individual market premiums decreased for 2020, thanks to reinsurance and individual mandate

In September 2019, the Rhode Island Office of the Health Insurance Commissioner published the average rate changes that the state’s insurers would be implementing for 2020. The two insurers that offer individual market plans in the state had the following average rate changes:

Although employer-sponsored health insurance premiums have tended to be more stable than individual market premiums over the last few years, most of the insurers in Rhode Island that offer small and large group health insurance implemented more significant rate increases for 2020 coverage. For the small group market, the rate changes range from a 0.9 percent decrease to an increase of 11 percent, and in the large group market, the rate increases range from 8.1 percent to 10.6 percent.

HealthSource RI enrollment: 2014 – 2020

Here’s a look at how enrollment in private individual market plans through the exchange has varied over the years:

2015: 31,337 people enrolled during the second open enrollment period.

2016: 34,670 people enrolled during the third enrollment period, so enrollment was up about 10 percent over the year before.

2017: 29,456 people enrolled during the fourth open enrollment period. Although state-run exchanges saw an overall average increase in enrollment for 2017 (while HealthCare.gov saw an overall average decrease), Rhode Island’s enrollment was 15 percent lower in 2017, which was by far the largest drop-off among the state-run exchanges where enrollment declined from 2016 to 2017.

Health Source RI explained the reasons for the decline, including ongoing technical difficulties and the fact that UnitedHealthcare exited the exchange (that was the case in 31 states, although most of them use HealthCare.gov, where enrollees were automatically re-enrolled in a plan from another carrier for 2017 if their old carrier was exiting the market and the member didn’t return to the exchange to pick a new plan; Health Source RI didn’t have that automatic re-enrollment feature in place for people whose carriers exited the exchange).

2018: 33,021 people enrolled during the fifth open enrollment period. HHS implemented a new enrollment schedule starting in the fall of 2017, which was half as long as originally scheduled, running from November 1, 2017, to December 15, 2017. State-run exchanges had flexibility to add to this enrollment window, and HealthSource RI opted to give residents until the end of December 2017 to enroll in a plan for 2018, with coverage effective January 1.

2019: During open enrollment for 2019 health plans, 34,533 people enrolled in plans through HealthSource RI. Rhode Island is one of only 12 states where exchange enrollment was higher for 2019 than it had been for 2018 (six of those 12 states have state-run exchanges).

2020: During the open enrollment period for 2020 coverage, 32,704 people enrolled in health plans through HealthSource RI.

A look back at insurer participation and rate changes in Rhode Island’s exchange over the years

As noted above, BCBSRI has proposed a small average premium decrease for 2019, and NHPRI has proposed a small average increase. A large enrollment pool is generally considered one of the cornerstones of a stable market, yet despite having an enrollment that hovers around 30,000 people (much lower than most other states), Rhode Island’s exchange has been remarkably stable. BCBSRI and NHPRI have offered plans statewide ever since the exchange debuted; the only change in insurer participation came when UnitedHealthcare joined the exchange for 2015 and 2016.

And with the exception of 2018, when premiums spiked due to the Trump administration’s decision to stop funding cost-sharing reductions, average premium increases in Rhode Island’s exchange have been in the single digits every year. The rate hikes are still unsustainable, which is why the state is pursuing a reinsurance program and individual mandate — but they’ve been much smaller than the increases in most other states.

There are a variety of reasons for the overall stability. Health Source RI’s Kyrie Perry explains that Rhode Island fully embraced the ACA, but also had previously implemented some of the same reforms that were part of the ACA. Perry noted that the state’s insurers are local, and have a long history in Rhode Island and strong connections with the health care providers

HealthSource RI is an active purchaser exchange, so the exchange takes an active role in determining which plans will be made available to consumers. And state regulators have a robust rate review process, working closely with insurers to set rates that are adequate but also competitive. Rhode Island also never allowed grandmothered plans, which helps to stabilize the ACA-compliant market.

Here’s a look back at how premiums and insurer participation have changed in Rhode Island since plans became available through the exchange:

2014: In 2014, plans were available via HealthSource RI from Blue Cross Blue Shield of Rhode Island (BCBSRI) and Neighborhood Health Plan of Rhode Island (NHPRI). The average benchmark premium in Rhode Island was a little higher than the national average in 2014, at $293/month (versus $273 nationwide).

Overall, rates increased by BCBSRI had garnered 97 percent of the exchange enrollments in 2014, while NHPRI had picked up just 3 percent. But when NHPRI decreased their rates for 2015, their market share increased considerably; during the 2015 open enrollment period, BCBSRI and NHPRI each got just under half of the exchange enrollees, while United snagged about 3 percent of the enrollees. The dramatic shift in market share was no doubt aided by the fact that Rhode Island required active renewals (as opposed to passive auto-renewals) for all policies during the open enrollment period for 2015 coverage.

2016: [6.5 percent average increase] At ACAsignups, Charles Gaba calculated a weighted average rate hike of just under 6.5 percent in Rhode Island for 2016, including off-exchange enrollments (it was about 6.28 percent if we only include exchange enrollments).

UnitedHealthcare requested an average rate increase of about 11 percent for their Compass individual plans. Rhode Island regulators approved a base rate increase of 4.1 percent (weighted average increase of 2.7 percent). NHPRI proposed increasing premiums by an average of 8.6 percent for 2015. They were approved for a base rate increase of 8 percent (weighted average increase of 5.8 percent). And BCBSRI proposed a 14 percent average rate increase (weighted average rate increase of just 7 percent), but RI Insurance Commissioner Kathleen Hittner reduced BCBS’ proposed rate hike down to 10 percent, which her office deemed a good compromise between keeping coverage affordable and maintaining insurer solvency. But Attorney General Peter Kilmartin announced on August 31 that he was taking Hittner to court over the rates, alleging that her office didn’t do enough to further reduce the rates before approving them. The BCBSRI rates approved by Hittner were upheld at the end of September, when a Superior Court Judge ruled in favor of Hittner.

2017: [1.3 percent average increase] UnitedHealthcare left the exchange in Rhode Island (and most other states where they had been offering coverage) at the end of 2016, but they only had about 4 percent of the exchange market share in 2016 (BCBS of RI had 47 percent of the exchange’s enrollees, and Neighborhood Health Plan had 49 percent.

In August 2016, the Rhode Island Office of the Health Insurance Commissioner announced final approved rate changes for 2017. State regulators ultimately approved rates that were lower than the carriers had proposed. In the individual market, a 5.9 percent average increase was approved for BCBSRI, while a 5.9 percent decrease was approved for NHPRI.For the entire individual market, Rhode Island’s final weighted average rate increase for 2017 was just 1.3 percent, which is dramatically lower than the rest of the country.

But if we only focus on the exchange (ie, not including the off-exchange market), Health Source RI officials announced in late October that average premiums would be 0.6 percent lower in 2017 than they were in 2016 — a dramatically different story than the rest of the country was facing for 2017.

Average rates could have been even lower, if Health Source RI had approved two additional plans proposed by Neighborhood Health Plan. The plans were approved by the state insurance commissioner, but not by the exchange. The exchange was concerned that the additional low-cost plans would have reduced the subsidies available to all exchange enrollees, making coverage less affordable if people chose plans other than the new low-cost options.

This tactic was heralded by some as the exchange taking active steps to keep coverage as affordable as possible for everyone, but was also castigated as limiting competition and preventing anyone from having access to the lowest-cost plans.

2018: [21.7 percent increase, much of which was due to the loss of CSR funding] In August 2017, the Rhode Island Health Insurance Commissioner announced that the rate review process for 2018 plans was complete, and that the overall average approved rate was slightly lower than proposed. The following average rate increases were approved for 2018:

But the silver plan rates for both insurers ultimately ended up being higher than initially approved, due to the Trump Administration’s decision to cut off funding for cost-sharing reductions (CSR). For both insurers, the premiums for silver on-exchange plans increased by an average of an additional 18 percent.

Rhode Island insurance regulators had asked both insurers to file back-up rates that could be used if CSR funding was eliminated. The Pittsburg Post-Gazette reports that BCBSRI opted to increase their silver plan premiums by about 30 percent, instead of 12 percent, after funding for CSR was eliminated. And the Rhode Island Office of the Health Insurance Commissioner explained that adding the cost of CSR would end up increasing Neighborhood’s silver plan premiums by an additional 18 percent (they noted, however, that this was net of some other changes that Neighborhood made simultaneously, including claims experience based on updated data, and a revised risk adjustment payout assumption which reduced the rates). Overall, rates increased by about 21.7 percent, but much of that was due to the loss of federal CSR funding.

Health Source RI confirmed that there would be a separate set of off-exchange-only silver plans that wouldn’t have the cost of CSR added to their premiums, and the cost of CSR was not added to other metal levels. For silver plan enrollees who receive premium subsidies, the subsidies are larger in 2018 to offset the cost of CSR. But silver plan enrollees who don’t get premium subsidies might be better served by a plan at another metal level in 2018, or by an off-exchange-only silver plan.

2019: [8.1 percent increase] Average premiums increased by 8.1 percent in the individual market in Rhode Island. The Rhode Island Office of the Health Insurance Commissioner noted that their approval of lower-than-requested premiums for 2019 would result in total premiums that would be nearly $22 million lower than they would have been if the rates had been approved as requested, although that encompasses the small and large group markets, as well as the individual market.

As was the case for 2018, Rhode Island’s insurers added the cost of cost-sharing reductions (CSR) to on-exchange silver plan premiums (this results in larger premium subsidies, which is beneficial for everyone who qualifies for premium subsidies).

Blue Cross Blue Shield of Rhode Island noted in their filing that they did not add any premium adjustment to account for the elimination of the individual mandate penalty in 2019. Neighborhood Health Plan attributed a 1.9 percent rate increase to the impending repeal of the individual mandate penalty, so their average proposed rate increase would have been 6.8 percent if the individual mandate penalty was remaining in place (as noted above, Rhode Island will have its own individual mandate starting in 2020).

In many states, insurers increased their premiums for 2019 to account for the expansion of the short-term health insurance market, which will act to siphon healthy people out of the ACA-compliant risk pool, leaving a sicker pool and necessitating higher premiums. But Rhode Island’s regulations on short-term plans are substantial enough that no insurers offer short-term plans in the state. So Rhode Island’s ACA-compliant insurers did not have to add to their premiums to account for the Trump Administration’s expansion of short-term plans, since the state’s restrictions on those plans continue to apply.

New law directs RI to seek federal permission to allow self-employed individuals to buy small group health plans

In July 2018, Governor Raimondo signed H.7121/S.2019 into law. The legislation directs the state to submit a 1332 waiver to CMS, seeking federal permission to allow sole proprietors and self-employed people (without any employees) to purchase small group plans through HealthSource RI’s SHOP exchange. Currently, under ACA rules, sole proprietors and self-employed individuals (including a business that is comprised of only two people who are married to each other) can only purchase coverage in the individual market. Pre-ACA, many states allowed small business insurer to sell “group of one” coverage to self-employed people, but that option was no longer allowed once the ACA was implemented.

As of md-2019, Rhode Island has not yet submitted a 1332 waiver to CMS. But assuming they do and it’s approved, self-employed Rhode Island residents will be able to purchase small group coverage or individual market coverage, selecting the option that best fits their needs and budgets.

In 2017, similar legislation (H.6082) was approved by the Rhode Island House of Representatives, but did not advance in the Senate. The 2018 version passed both chambers with zero votes in opposition, and was signed into law soon thereafter. Nationwide, the small group market has tended to be much more stable than the individual market in the years since the ACA was implemented, with less volatility in premiums and insurer participation — although as noted above, that’s not the case in Rhode Island heading into 2020.

It’s worth noting that Virginia passed similar legislation in 2018, but did not include a provision requiring the state to seek permission from the federal government. Instead, the Virginia Bureau of Insurance just implemented the legislation as of July 2018, allowing self-employed people to purchase small group plans.

Legislation to make pregnancy a qualifying event did not get a vote in 2017

In 2017, five Democratic state senators in Rhode Island introduced S.201, which would have allowed a pregnant woman to enroll in a plan through Health Source RI at any time after the commencement of her pregnancy, with coverage effective immediately. However, S.201 did not advance to a vote during the 2017 session.

Rhode Island was one of only six states in 2017 with a Democratic state government trifecta. Legislation to expand access to special enrollment periods for pregnant women would almost certainly die in a state with Republican leadership, but Rhode Island had a Democratic majority in the House and Senate, and a Democratic Governor. Despite that, the legislation did not advance in 2017.

Abortion controversy

Rhode Island’s exchange is one of only five in the country that did not offer any plans in 2014 that specifically excluded abortion coverage. This caused some controversy with a local Catholic Bishop, and in neighboring Connecticut, the exchange subsequently started offering four plans without abortion coverage. HealthSource RI’s former director Christine Ferguson said in November 2014 that the exchange was working with the federal government to provide a multi-state plan without abortion coverage.

In January 2015, a lawsuit was brought against HealthSource RI to resolve the issue, because by law, exchanges must have at least one plan available without elective abortion coverage. A bronze plan without abortion coverage did become available through HealthSource RI in January 2015, but plans without abortion coverage were not available for the other three metal levels.

However, the FY 2016 budget took effect July 1, 2015, and it required carriers in HealthSource RI to offer at least one plan at every metal level that doesn’t include abortion coverage starting in 2016. The new RI provision went further than the ACA’s requirement, and has come under fire from abortion rights advocates who say that it reduces women’s access to abortion.

Rhode Island has considered switching to HealthCare.gov, but ultimately kept its state-run exchange

Rhode Island Governor Raimondo has said she wants to keep HealthSource RI as a state-run exchange, although she has acknowledged that funding is an issue. Anya Rader Wallack, who headed the exchange for most of 2015, wanted to continue the state-run exchange model, but noted that in a small state, the exchange has to be “right-sized” to fit the state and its budget. The issue was debated by the largely Democratic legislature in the 2015 session, and while lawmakers ultimately decided to keep the exchange in the 2016 budget, some lawmakers favored turning the exchange over to the federal government instead.

A bipartisan bill (H7817) introduced in the Rhode Island House of Representatives in March 2014 would have eliminated the state-run exchange at the end of 2014 and switched operations over to Healthcare.gov instead.

That bill was held for further study by the legislative committee in May 2014, and was not taken up again in 2015. But at the start of the 2015 legislative session, a similar bill (H5329) was introduced. It was sent to the House Finance committee on February 5, and called for turning the exchange operations over to Healthcare.gov as of the end of December 2015. Ultimately, it did not advance beyond the Finance Committee.

Governor Lincoln Chafee (who was first a Republican, then an Independent, then a Democrat), did not run for re-election in 2014, and was replaced in January 2015 by Governor Gina Raimondo, also a Democrat. Prior to the election, Raimondo had said that her plan would be to keep the exchange but with a lowered budget (this is in opposition to the other candidates who had said they would either support switching to HealthCare.gov or working with Massachusetts to form a regional exchange).

Health Source RI history

Former Gov. Chafee established the Rhode Island Health Benefits Exchange through an executive order in 2011. The state submitted a blueprint for a state-run exchange to the U.S. Department of Health and Human Services (HHS) and received conditional approval in December 2012. The state exchange was re-branded as HealthSource RI in July 2013.

Chafee’s executive order established the exchange with the executive branch of state government and set up a 13-member board of directors. The board receives input from the Expert Advisory Committee (which includes representatives of insurance brokers, insurers and medical providers) and the Rhode Island Healthcare Reform Commission (which includes more than 200 stakeholders).

The Commission was established by Chafee in early 2011 and charged with implementing health care reform in the state. The Commission includes multiple workgroups that study and provide recommendations on various aspects of exchange operations.